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An Indemnity Bond is a form of a surety that one provides while undertaking to indemnify and to assure the other that in event of possible losses/ damages of nature as mentioned in the bond and/ or due to the reasons provided in the bond, he shall be duly compensated.
In simple words, an Indemnity Bond is an undertaking provided by a party entering into a contract promising to bear the losses in event of the breach of contract.
Thus, when a party liable to perform the obligations as per the contract refuses to oblige, the defaulting party has the right to recover the damages and losses incurred by the defaulting party.
The most common example of an Indemnity Bond is the General Insurance policy. Here the authority which issues the Insurance Policy undertakes to indemnify the party buying the policy in the events as specified.
According to the law, Section 124 of the Indian Contract Act, 1872 states an agreement of indemnity between two parties wherein one party promises to pay for the damages of another party if caused by him or by another person.
Most certificates of title bonds are issued immediately, but it depends on the required bond amount. Bonds up to $5,000 are issued immediately and cost $100. Bonds up to $25,000 are also issued immediately, but the cost is calculated at a rate of $20 per $1,000 of coverage.
The indemnity bond involves a contract between 3 individuals – principal, oblige and surety.
The condition for the enforcement of the Indemnity bond is the infringement in the contract. The liability arises upon the breach of contract and the defaulting party is then liable to compensate the other party.
An affidavit is a statement-on-oath stating that all the statements made are true and correct to the knowledge and no material information has been concealed. Whereas an Indemnity Bond is an undertaking providing a surety that the party shall be compensated monetarily in event of the breach of the contract.
Apart from a General Insurance Policy, an Indemnity Bond is also drawn between employer and an employee, where an employee undertakes to serve the employer for a specific period of time and if he leaves the services before completion of the said term, then monetary compensation has to be paid.
An Indemnity Bond is also drawn when a person loses a Share Certificate where it states that the Share Certificate has genuinely got lost and the request for issuing of a new Share Certificate be processed with the undertaking of the applicant to indemnity of all costs and expenses with regard to the issue of new Share Certificate.
An Indemnity Bond is also provided to an Educational Institution/ Company when applying for alteration in the basic details of an individual undertaking to indemnify any loss which may arise as a consequence of the changes in the basic details of the applicant.
An Indemnity Bond may be executed between a government authority and independent contractors.
Thus, Indemnity Bonds may be executed between varieties of parties in the transaction of varied nature. For more info visit Enterslice.
An Indemnity Bond may be drafted as below and executed on a stamp paper of the value which differs for every state.
INDEMNITY BOND FOR GUARANTEED PERFORMANCE
This deed of Indemnity executed on [DATE] at [PLACE] by ___________ having its registered office at ___________, through Mr. ___________ as the authorized representative, hereinafter referred to as the ‘Indemnifier’, the expression which shall, unless repugnant to the context or meaning thereof, include its administrators, successors, representative and assignees in favour ___________ having its registered office at ___________, through Mr. ___________ as the authorized representative, hereinafter referred to as the ‘Indemnified’, the expression which shall, unless repugnant to the context or meaning thereof, include its administrators, successors, representative, and assignees.
WHEREAS the indemnified herein has awarded to the Indemnifier herein a Purchase Order No. ___________ valued at Rs ___________ (Rupees ___________only) for the supply of ___________ on terms and conditions as mutually agreed by the parties.
WHEREAS, a clause of the above mentioned Purchase Order provides for the guarantee (i.e.) for the products supplied by the Indemnifier to the Indemnified, to be free from any defect subject to faulty material or workmanship for a period of twelve (12) calendar months from the date of commissioning of the Purchase Order.
The Indemnifier hereby irrevocably agrees to indemnify the indemnified in the event of any defect subject to faulty material, workmanship or any defect which may arise in the delivered due to the shortcomings of the Indemnifier for the said period of twelve (12) calendar months from the date of commissioning of the Purchase Order. The indemnifier shall as may be deemed necessary repair the defective products at the site, free of cost, within a reasonable time specified by the indemnified or shall reimburse the pro-rata cost of the products to the extent as per the Purchase Order, or shall deliver spares for the defective portion only free of cost at site with respect of the Purchase Order.
(Signature with Name and Designation)
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The indemnity bond format followed in India-upld_454392506276856613_indemnitybond